Financial Ratio Analysis of Jurys Inn in Hospitality Industry

This report discusses the financial ratio analysis of Jurys Inn in the hospitality industry. It includes calculations and interpretation of profitability, liquidity, and gearing ratios. Advantages and disadvantages of financial ratio analysis in the hospitality industry are also discussed.

Assessment 1 Jurys
Inn

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Calculation of Financial Ratios of Jurys Inn...............................................................................3
Discussion about why Financial Ratios are important and their fluctuations in the hotel
industry........................................................................................................................................5
Advantages and Disadvantages of Financial Ratio Analysis in a Hospitality industry...............7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Any successful business relies on sound financial management. Similarly, the most successful
hotels depend on basic financial management techniques to run their properties efficiently.
Creating an annual budget, building a precise financial monitoring model, performing continuing
audits, and creating a reporting system that supports managers in keeping track of P&L data are
all examples of financial management best practises in the hospitality sector (Adesanmi, 2020).
Accountability creates workers and managers responsible for attaining monetary goals in their
individual practical areas and a team of extremely competent investment authorities are equally
essential for monetary accomplishment on the human resources side. The following report
highlights a case of Jurys Inn which is working in the hospitability industry. The financial ratios
of the business are calculated in the following report followed by their interpretation.
MAIN BODY
Calculation of Financial Ratios of Jurys Inn.
Financial ratios are important tools that assist firms and investors in analysing and associating
relationships among numerous fragments of monetary data throughout the sequence of a
corporation's history, an industry, or an entire industrial sector. Financial measures are the most
common and commonly used tools for evaluating a business's financial health. Ratios are
straightforward to understand and compute. They have also been used to compare companies
from different industries. A ratio may be used by both large and small firms to compare financial
data because it is mathematical trend analysis on proportions (Poretti, and Blal, 2020). Financial
ratios, in some ways, overlook the size of a company or the industry in which it works. Ratios
are a method of calculating a company's financial health and performance. Following are the
calculations of different financial ratios of Jurys Inn for the year 2019 and 2020, followed by
their interpretation.
Profitability Ratios: Benefit proportions are an assortment of monetary markers used to
evaluate an organization's capability to create income over the long haul according to deals,
working costs, accounting report resources, or investors' value, involving information from a
specific moment.
Gross Profit Margin = Gross Profit / Sales * 100
For 2019, = 5,050 / 5,500 * 100

= 91.8 %
For 2020, = 5,150 / 6000 * 100
= 85.8 %
Net Profit Margin = Net Profit / Sales * 100
For 2019, = 4,008 / 5,500 * 100
= 72.8 %
For 2020, = 4,073 / 6000 * 100
= 67.8 %
Interpretation of Profitability Ratios: From the above calculated profitability ratios it can be
seen that the gross profit margin of the business is high, which means that the business’s
operating costs are less and they are able to save most of its revenue after deducting operating
costs from revenue. The trend in this can be seen that the business is seen to have reduced its
gross profit margin in the year 2020, the margin is pretty good but it should not reduce more
further as it impacts the profitability of the business. The net profit margin of the business can be
seen to be at 72% in the year 2019 which means that only almost 30% of the revenue of the
business was used up in its operating and non-operating costs. The business can be seen to have a
good profitability but this margin of the business has decreased by some amount in the year
2020. The business should focus on maintaining the profitability margin of the business.
Liquidity Ratios: A liquidity proportion is a monetary metric that assesses an organization's
capacity to fulfill transient getting commitments (Menicucci, 2018). The measurement is utilized
to decide whether an organization's present resources, otherwise called fluid resources, are
adequate to satisfy its present liabilities.
Current Ratio = Current Assets / Current Liabilities
For 2019, = 3065 / 1339
= 2.28
For 2020, = 3240 / 1616
= 2.00
Quick Ratio = Current Assets – Inventory / Current Liabilities
For 2019, = ( 3065 – 1450 ) / 1339
= 1,615 / 1339
= 1.20

For 2020, = ( 3240 – 1420 ) / 1616
= 1,820 / 1616
= 1.12
Interpretation of Liquidity Ratios: From the above calculated liquidity ratios it can be seen
that the business is in a good liquid position. The ideal current ratio of the business is considered
to be 2:1 and the current ratio of the business, in both the years are above this ideal ratio. The
business can be said to have good liquid position. The quick ratio of the business is also good as
the ideal quick ratio is considered to be 1:1 and the business’s quick ratio is above that. The trend
in the liquidity ratio of the business can be said that the liquidity position of the business have
reduced in the these two, even though the reduction is not major, the business should still focus
on maintain the liquidity above the ideal ratios.
Gearing Ratios: The gearing proportion is a important research metric that measures a
corporation's long-term debt in relation to its equity capital (Kalyar, Ali, and Shafique, 2021).
When assessing the amount of debt a company takes on in contrast to its equity, the debt to
equity ratio is widely utilised.
Debt Equity Ratio = Total Debt / Total Equity
For 2019, = ( 1339 + 150 ) / 2,068
= 1,489 / 2068
= 0.72
For 2020, = ( 1616 + 145 ) / 2,056
= 1,761 / 2,056
= 0.85
Interpretation of Gearing Ratios: From the above calculated gearing ratios it can be seen that
the business’s debt equity ratio has increased in the two-year analysis of Jurys Inn. Debt equity
ratio of the business shows from where the business is acquiring its funds to use in the operations
of the business. The business is using more of its capital than debt from the bank. This means
that the business may not take required risks in the business as they are not using funds from the
debt source. The business is working fine but as they are working in the hospitality industry,
taking some risks will be beneficial for the business and they should try to raise more funds in
the form of debts.

Discussion about why Financial Ratios are important and their fluctuations in the hotel industry.
When it comes to reviewing financial accounts, evaluating business performance, and spotting
corporate difficulties, financial ratios analysis is a useful tool (Farrukh, M., and et.al., 2021). The
financial ratios analysis will make the business evaluation easier to manage and compare to
rivals and the industry average.
Financial ratios are determined over a set period of time. It helps the businesses to better
understand how financial ratios change over time and to ask the correct questions about why this
happened. It generally contributes a lot to the comprehension of financial statements. As a result,
financial ratios can be compared throughout time and give accurate data on a company's financial
success.
The relevance of financial ratios is further emphasised since industry-specific financial ratios are
accessible and may be compared. It enables the businesses to analyse the company's performance
in comparison to benchmark rivals and the industry average. Financial ratios are also necessary
to calculate in order to better predict a company's future success.
Individual financial parameters must be understood as well as the overall image of a firm. To
gain a complete picture of what is going on with a firm, it is necessary to compute and evaluate
multiple financial statistics from several categories (liquidity, efficiency, profitability, and
leverage).
When financial ratios can be compared to industry financial ratios or benchmark ratios obtained
from rivals or comparable firms, financial ratio analysis becomes even more helpful (Chang, and
Wu, 2021).
As far as hospitality industry is concerned, One of the most difficult financial concerns in the
hospitality industry is room pricing. Due to the complexity of the decision-making process,
finance models are developed to assist in the decision-making process. Demand, occupancy, and
expenses must all be included into the price strategy (Campisi, Mancuso, Mastrodonato, and
Morea, 2019). The money chief is performing yield the board when lodging costs are changed to
boost both inhabitance and income. We should view how income is impacted by alterations. The
demand for rooms is expected to diminish if hotel prices are raised. If the rates is lowered,
however, consumption is likely to grow. If the increase in production or rate is inadequate to
raise overall income, the alteration will reduce earnings.

Advantages and Disadvantages of Financial Ratio Analysis in a Hospitality industry.
Advantages of Ratio Analysis Disadvantages of Ratio Analysis
Ratio analysis is a strategy for coordinating an
organization's functional choices in light of a
rate number. As a result, in light of the worth
that proportion examination has meant, firms
can either uphold or put an administration
strategy down. Moreover, proportion
investigation changes over budget summary
measurements into basic proportions and
rates. Therefore, organizations might settle on
fast choices to advance their monetary
circumstance.
Ratio analysis' fundamental flaw is that it is
an approach rather than a comprehensive
solution. It has limited value on its alone
unless decision makers use it to make good
decisions.
Ratio analysis is a strategy for making
decisions that actively evaluates the benefits
and drawbacks of various actions (Thomas,
and Rabiyathul Basariya, 2019). Because ratio
analysis also reveals a firm's growth
component, it draws management's attention
to a variety of operational areas. As a result,
the judgement bodies inside a company can
accurately assess the company's
disadvantages.
Different companies utilise different ways to
ratio analysis. The data collected is frequently
incompatible as a consequence of the shortage
of consistency in the procedure. Certain
corporations, for example, may or may not
use current liabilities when calculating their
current ratio.
Proportion examination may likewise uncover
data about an organization's accomplishment
in its industry. Furthermore, this procedure
aids a corporation in determining its place in
the related industry. As a result, organisations
use the ratio analysis approach to uncover
strategies to outperform their market
One of the biggest drawbacks of proportion
investigation is that it only evaluates a
corporation's monetary preferences. As an
outcome, it openly overlooks qualitative
factors of a corporation, such as efficiency
and employee at work situations.

competition.
By doing drift examination, it helps guaging
and arranging.
Fiscal declarations seem to be difficult to
understand.
Dissects earlier patterns to help with guaging
the company's spending plan.
Several organisations collaborate in various
businesses, each with its own array of
external factors such as market organization,
legislation, and so on. Because these traits are
so important, comparing these two
organisations from various industries may be
challenging (Almani, and Nobanee, 2020).
It supports deciding the proficiency with
which an organization or association works.
Financial accounting data is influenced by
opinions and hypotheses. Accounting criteria
give different accounting methods, lowering
comparability and making ratio analysis less
relevant in such instances.
It offers buyers of bookkeeping information
with significant data about the business'
exhibition.
Users are becoming increasingly worried
about current and future data, therefore ratio
analysis reveals the links between previous
data.
It helps with the correlation of at least two
organizations.
It supports deciding the association's liquidity
as well as its drawn out dissolvability.
CONCLUSION
From the above-mentioned report, it can be concluded that the financial ratio analysis is one of
the major aspects in the success of any business. The report has discussed the case of Jurys Inn,
working in the hospitality industry. The ratio calculation of the business shows good profitability
and liquidity position of the business but they should focus on raising funds in the form of debts

so they can take risks in the competitive market. The importance of ratios analysis is discussed
followed by its advantages and drawbacks in the case of hospitality industry.

REFERENCES
Books and Journals
Adesanmi, A.A., 2020. Finance in the Hospitality and Tourism Sector. In Contemporary
Management Approaches to the Global Hospitality and Tourism Industry (pp. 166-184).
IGI Global.
Poretti, C. and Blal, I., 2020. The asset-light strategies and the dividend puzzle: International
evidence from the hospitality industry. International journal of hospitality
management, 91, p.102639.
Menicucci, E., 2018. The influence of firm characteristics on profitability: Evidence from Italian
hospitality industry. International Journal of Contemporary Hospitality Management.
Kalyar, M.N., Ali, F. and Shafique, I., 2021. Green mindfulness and green creativity nexus in
hospitality industry: examining the effects of green process engagement and
CSR. International Journal of Contemporary Hospitality Management.
Farrukh, M., and et.al., 2021. High-performance work practices do much, but HERO does more:
an empirical investigation of employees' innovative behavior from the hospitality
industry. European Journal of Innovation Management.
Chang, B.G. and Wu, K.S., 2021. Convex-concave effect of financial flexibility on hospitality
performance: quantile regression approach. International Journal of Contemporary
Hospitality Management.
Campisi, D., Mancuso, P., Mastrodonato, S.L. and Morea, D., 2019. Efficiency assessment of
knowledge intensive business services industry in Italy: Data envelopment analysis
(DEA) and financial ratio analysis. Measuring Business Excellence.
Thomas, J. and Rabiyathul Basariya, S., 2019. A Study on the Issues of Financial Ratio
Analysis. Indian Journal of Public Health Research & Development, 10(3).
Almani, M. and Nobanee, H., 2020. Financial Statement Analysis of NIKE. Available at SSRN
3675026.